2021 Legislative Proposals REPTL Update Lauren Davis Hunt

2021 Legislative Proposals ———— REPTL Update Lauren Davis Hunt Osborne Helman Knebel & Scott, LLP Craig Hopper Mikeska PLLC October 14, 2020

OVERVIEW 1. Preliminary info • • • Who is REPTL process for new proposing new legislation What’s the 2021 Legislative Session going to be like? 2. The REPTL Package • • Decedent’s Estates Guardianships Trusts Powers of Attorney and Advanced Directives (PAAD)

PRELIMINARIES…

Who are you and why are you here? • Real Estate, Probate & Trust Law Section of the State Bar (“REPTL”) • www. reptl. org • Probate & Trust Committees: • Decedent’s Estates • Trusts • Guardianship • Powers of Attorney & Advanced Directives • Fiduciary Litigation • Estate and Trust Legislative Affairs

People to Thank/Blame! • Eric Reis, REPTL Immediate Past Chair eric. reis@tklaw. com • Reid Wilson, REPTL Chair rwilson@wcglaw. com • Committee Chairs: • Greg Kimmel, Decedents’ Estates Committee; • Gene Wolf, Trusts Committee; • Don Totusek, Powers of Attorney & Advanced Directives Committee; • Catherine Goodman, Past Chair of Guardianships Committee

People to Thank/Blame! • Co-chairs of the Estate and Trust Legislative Affairs Committee for REPTL • Craig Hopper, chopper@hoppermikeska. com • Lauren Davis Hunt, ldhunt@ohkslaw. com • Bill Pargaman, Past REPTL Chair, Pandemic Resource, Legislative Guru; bpargaman@snpalaw. com

Origination of REPTL Bills • Fall 2019 -Spring 2020: • REPTL committees draft new legislation proposals; discuss at 3 REPTL Council meetings. • June 2020: • REPTL draft bills sent to all State Bar sections for comments. • August, 2020: • REPTL presents package to State Bar Legislative Policy Subcommittee, Subcommittee provides recommendations to State Bar Board of Directors • September 25, 2020: • State Bar Board of Directors meets to consider recommendations & approve legislative packages.

Legislative Process • November 9, 2020: Prefiling of bills for the 87 th Legislative Session. • January 12, 2021: 87 th Legislative Session begins. • May 31, 2021: 87 th Legislative Session ends.

What to Expect from the 2021 Session ?

www. REPTL. org

www. REPTL. org

DECEDENTS’ ESTATES… Greg Kimmel Chair of REPTL Decedents’ Estates Committee greg@allenlottmann. com

REPTL Decedents’ Estates Proposals • Alternative to Certified Mail-Return Receipt Requested • Current law: Multiple sections in Estates Code require notice be given by “registered or certified mail” • The Problem: difficulty getting green cards returned

REPTL Decedents’ Estates Proposals • Alternative to Certified Mail-Return Receipt Requested • Solution: Replace “registered or certified mail” with “qualified delivery method” • “Qualified delivery method” will include: • a) hand delivery with proof; • b) CM-RRR; or • c) “any private delivery service designated by the United States Secretary of the Treasurer under authority of Section 7502 of the Internal Revenue Code of 1986. ” • Private Delivery Service: • Is available to general public • Is as timely and reliable on a regular basis as the U. S. Mail; and • Keeps an electronic database of deliveries

REPTL Decedents’ Estates Proposals • Effect of Divorce on Trust Dispositions • Estates Code § § 123. 051 -123. 056: effect of divorce on dispositions in trust in favor of former spouse or former spouse’s family • 2019 Legislative Session – the EC provisions were copied to Trust Code § 112. 101 -112. 105 • New legislation – • amends EC § 123. 051 to redirect you to Trust Code Ch. 112; and • repeals Estates Codes provisions that are now duplicative

REPTL Decedents’ Estates Proposals List of Property in Heirship Proceeding • Current Law: Application to determine heirship requires: “a general description of all property belonging to the decedent’s estate or held in trust for the benefit of decedent…” • Problem: For a non-resident decedent, do you have to list all property they owned, even if the TX Court’s heirship determination doesn’t impact such property? • If resident decedent owned property outside of TX, do you have to list that property? • Solution: clarifies that you only have to list property that is “subject to distribution pursuant to a judgment in the proceeding to declare heirship in this state”

REPTL Decedents’ Estates Proposals Affidavit of Heirship as Evidence • Current Law: EC 202. 151: “In a proceeding to declare heirship, testimony regarding a decedent’s heirs and family history must be taken from two disinterested and credible witnesses in open court, by deposition in accordance with Section 51. 203, or in accordance with the Texas Rules of Civil Procedure. • Problem: Some practitioners thought admissible evidence is limited to the listed categories. • Solution: add language to clarify that an affidavit of heirship can serve as “testimony” in a proceeding to declare heirship.

REPTL Decedents’ Estates Proposals Sales of Personal Property in Dependent Administration • 2019 Session: We updated language in statutes for sale of real property in dependent administrations to make more user-friendly (no substantive change) • New Legislation: Update language in statutes for sale of personal property in dependent administrations to make more user-friendly (no substantive change)

REPTL Decedents’ Estates Proposals Applicant’s SSN and Driver’s License Requirement • 2007 – CPRC 30. 014 added to require last 3 digits of SSN and DL number to any civil action filed in District Court, County Court or County Court at Law • Reason for law: Clerks must include this info in abstracts of judgment issued in civil suits; Title companies said it helped them identify judgments applying to real estate • Did not apply to Statutory Probate Courts • Problem: if filing application to probate in county court or CCL, must include the info, but if filing same document in Statutory Probate Court, info not required.

REPTL Decedents’ Estates Proposals Applicant’s SSN and Driver’s License Requirement • 2017 Solution by non-REPTL bill: Estates Code was amended to require inclusion of SSN and DL in probate applications • Problem: • This information is not necessary in probate context because an abstract of judgment is not an issue • Identity theft • Solution: Remove the sections of the 2017 bill that require these numbers in all probate proceedings • Noted Grumblings: Statutory Probate Judges did not object, but expressed hesitance in removing requirement

REPTL Decedents’ Estates Proposals Unsworn Declarations in Lieu of Sworn Oath • Current Law: CPRC 132. 001 currently provides that unsworn declarations don’t apply to “an oath of office required to be taken before a specified official other than a notary public. ” • Problem: Clerks and Courts were concerned that this provision means that unsworn declarations cannot be used for oaths of personal representatives • Solution: • Amends multiple EC sections to allow a person to make an unsworn declaration in lieu of a sworn oath to qualify as personal representative. • Statutes amended: EC 305. 001 -305. 003, 305. 051 -305. 053 and 305. 055

REPTL Decedents’ Estates Proposals New procedures for serving minors 12+ years of age • Current Law: • Minors 12 or older must be personally served in a guardianship (no waiver allowed); • Minors under 12: parents can waive service. • New Legislation: • Certain persons can waive personal service on behalf of minor under age of 16 • Minors 16+ can waive personal service • Statutes amended: EC 202. 056 (Heirships) and 258. 002 (probate of lost will)

REPTL Decedents’ Estates Proposals A Tribute to the Estates Law Professors

REPTL Decedents’ Estates Proposals “Community Debts” are OUT! • Current Law: • There are references to “community debts” in several sections of the EC related to administration of a decedent’s estate Problem: there’s no such thing as “community debts” New Legislation: • Removes reference to “community debts” and instead says “debts for which some community property is liable for payment” • Statutes amended: EC 453. 003, 453. 006, 453. 007

REPTL Decedents’ Estates Proposals Community Property Subject to Creditors’ Claims • Current Law: • Probate Code 156 was titled “Liability of Community Property for Debts” • When moved to EC 101. 052, it was named “Liability of Community Property for Debts of Deceased Spouse” Problem: • While title is not to be considered, some people may undue weight to the title. • Section should apply to debts of surviving spouse, too. • Would help to make section conform to language of Ch. 453 re: Administration of Community Property New Legislation: • Clarifies language, but no substantive change. • Statutes amended: EC 101. 052

REPTL Decedents’ Estates Proposals Who is a “PERSON”? ? ? • Current Law: • EC 22. 027: “Person” includes a natural person and an individual, corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity. Problem: An estate and trust are not legal entities New Legislation: • Adds “personal representative of an” before “estate” • Adds “trustee of” before “a trust” • Statutes amended: EC 22. 027

REPTL Decedents’ Estates Proposals

REPTL Decedents’ Estates Proposals What Got Axed? • Probate by Submission – Proposed legislation would have allowed courts to approve routine, uncontested probate applications by written submission. • Remote Notarization

REMOTE NOTARIZATION The Governor’s Order • March 24, 2020 – REPTL Chair Eric Reis letters to Governor’s office and Supreme Court • Allowing traditional notaries to notarize documents via two-way audio/video conference (i. e. Zoom, etc. ) • April 8, 2020 Governor’s Order applies to: • Self-proving affidavit for a will • Financial powers of attorney • Medical powers of attorney • Directive to physicians • Oath of executor or administrator • Oath of a guardian

REMOTE NOTARIZATION The Governor’s Order • Suspends requirement of physically appearing before a notary. • Notary must verify identity of signor at time signature taken using two-way video & audio conference technology • Verify identity either based on personal knowledge of person OR on presentation of government-issued ID that contains person’s signature and photo • Signor must send legible copy of signed document by fax or email to notary • Notary then notarizes the transmitted copy and sends it back to signor by fax or email • Transmission of document should be during the two-way video and audio conference (use Adobe Scan or other scanning apps)

REMOTE NOTARIZATION The Governor’s Order • Order lasts until Governor terminates the order or until the March 13 th disaster declaration is lifted or expires. • Documents executed in accordance with temporary rules while they are in effect remain valid after termination of temporary rules • For sample remote notary forms and further info, see Bill Pargaman’s paper at his website: • https: //snpalaw. com/resources

REPTL Remote Notarization Bill • Would have added a section to Ch. 406 of Government Code re: notarizations • Would have allowed continued remote notarization by two-way audio and video conference • Business Law Section objected • Electronic notarization procedures in the federal E-sign statute, TX Uniform Electronic Transactions Act and TX Online Notarization Statute are sufficient to address issues related to virtual notarization • Multiple other technical issues

GUARDIANSHIPS… Catherine Goodman Former Chair of REPTL Guardianships Committee cgoodman@cgoodmanlaw. com Dyann Mc. Cully Chair of REPTL Guardianships Committee dmccully@theblumfirm. com

REPTL Guardianship Proposals Guardianships and Trust Cases • Clarifies Sec. 1021. 001 concerning “matters related to guardianship proceeding”. • Allows county courts at law to hear trust cases related to guardianship proceedings or incapacitated beneficiaries

REPTL Guardianship Proposals Unsworn Declarations • Amends multiple sections to allow for usage of unsworn declarations in guardianship proceedings

REPTL Guardianship Proposals Ward’s Bill of Rights • Amends ward’s bill of rights in Section 1151. 351(b) to conform to Section 1202. 054 • Sec. 1202. 054 – provides for appointment of court investigator or guardian ad litem to investigate modification or termination of guardianship. • Sec. 1151. 351(b) says a court investigator, guardian ad litem, or attorney ad litem may be appointed. • Amendment removes “attorney ad litem” from Sec. 1151. 351(b) • Statutes amended: EC 1151. 351(b)

REPTL Guardianship Proposals Notice of Guardianship Proceeding • Amends to provide that proper newspaper for notice of guardianship proceeding is a newspaper of general circulation in the county (instead of “printed in the county”) (same as 2017 decedents’ estates change to 308. 051). • Statutes amended: EC 1153. 001(a) and 1153. 001(c)

REPTL Guardianship Proposals Personal Property and Real Property Sales Procedures • Statutes revised to be more intuitive and consistent with similar 2019 revisions to the sale of real property in decedent’s estates and proposed changes in decedents’ estates regarding personal property sales • Clarifies sale by public auction versus private contract • Statutes amended: EC 1158. 105(a); 1158. 401 -405, 1158. 502, 1158. 551 -552, 1158. 556 -558

REPTL Guardianship Proposals Ch. 1301 Management Trusts: • Notice provisions for application to create management trust are now identical to notice for guardianship application. • Must serve a serving guardian w. application to create management trust • Termination provisions for minor’s trust must require termination on: • death or • 18 th birthday, • unless court extends trust to 25 th birthday. • If minor has incapacity other than being a minor, court can extend a guardianship management trust for an incapacitated minor until: • death or • removal of incapacity • Termination provisions for adult’s trust must require termination on: • death, • upon court finding that trust no longer in beneficiary’s interests, or • when beneficiary regains capacity. • Both guardian of estate and guardian of person must receive copy of annual accounting.

REPTL Guardianship Proposals Sale of Property by Nonresident Guardian • Clarifies procedures applicable when a sale of property is made by a nonresident guardian • Provides that funds held in court registry can be withdrawn and paid to such nonresident guardian. • Statutes amended: EC 1355. 002 and 1355. 105

TRUSTS… Gene Wolf Chair of REPTL Trusts Committee gene. wolf@kempsmith. com

REPTL Trust Proposals Homesteads and Revocable Trusts • Harmonizes the provisions of the Tax Code and the Property Code re: a homestead held in a revocable trust. • In re Cyr, No. 18 -50102 -CAG, 2019 WL 3213053 (Bankr. W. D. Tex. , July 16, 2019): The court said “rent free and without charge” (Tax Code) and “at no cost” (Prop Code) had different meanings. • Thus, a revocable trust did not meet the creditor protection homestead test because it tracked occupancy rights language of the Tax Code instead of the creditor protection provision of the Property Code. • The proposal changes the wording of Property Code 41. 002(a)(1) to better conform with the homestead exemption language of Tax Code 11. 13(j).

REPTL Trust Proposals Spendthrift Provisions and Testamentary GPOAs • Amends Property Code spendthrift trust provisions • Clarifies that trust property subject to a testamentary general power of appointment is not subject to claims of the powerholder’s creditor, UNLESS the power is actually exercised. • Historically, Texas has followed common law and Restatement 2 d of Property. • Restatement 3 rd of Property and the Uniform Power of Appointment Act diverged to say appointive property is subject to creditor claims against the powerholder regardless of whether power was exercised. • Amendment to Prop. Code 112. 035 clarifies we follow the Restatement 2 d approach on creditor exposure.

REPTL Directed Trust Bill Appointing Attorney ad Litem to Trust Proceeding • Before the court can appoint an attorney ad litem, Court must determine that representation of the minor or incompetent beneficiary would otherwise be inadequate • Same standard as currently exists before appointment of guardian ad litem in a trust proceeding. • Statutes amended: Prop. Code 115. 014

REPTL Directed Trust Bill Decanting • Tweaks a 2019 revision to clarify that assets can be decanted into a second trust with the same name and EIN of the first trust. • Statutes amended: Prop. Code 112. 0715

POWERS OF ATTORNEY AND ADVANCED DIRECTIVES (PAAD)… Don Totusek Chair of REPTL Powers of Attorney & Advanced Directives Committee don. Totusek@fftllplaw. com

REPTL PAAD Proposals Anatomical Gifts • Statement of anatomical gift, or revocation of same, or statement of refusal to make anatomical gift, may be executed before two witnesses or a notary Statutes amended: Health & Safety Code 692 A. 005 and 692 A. 006, 692 A. 007

REPTL PAAD Proposals Removal of Remains • The order and identity of persons who must consent to remove decedent’s remains is the same as the persons who have right to control initial disposition of remains • Statutes amended: Health & Safety Code 711. 004(a)

REPTL PAAD Proposals Statutory Durable Power of Attorney • Amends statute for an agent with power over “Business Operation Transactions”. • Clarifies that agent has the power to act on behalf of the principal’s business interests for more than just partnerships. • Current language dates back to 1993, before common use of LLCs. • Proposed language based on Uniform Power of Attorney Act (2006). • Statutes amended: EC 752. 107

REPTL MPOA Proposals • Statutory form permissible, not mandatory. • Valid medical power must: • be in writing; • be signed by the principal (or another person at principal’s direction) before two witnesses or notary; and • contain principal’s name, date of execution, and designation of agent.

REPTL MPOA Proposal (cont. ) • In the past, Texas Medical Association and Texas Hospital Association have strongly opposed making form optional. • Despite fact that 45 states have optional forms, TMA and THA argue use of any form other than mandatory form would create too much confusion. • Requirement of form over substance shown especially problematic during pandemic. • REPTL hopes to work with stakeholders to finally make this helpful bill become law.

REPTL MPOA Proposals • Statutory presumption that co-agents can act independently • If co-agents can act independently, health care provider must follow directive of any co-agent unless there’s a disagreement among co-agents

REPTL MPOA Proposals (cont. ) • If co-agents disagree, and if MPOA provides for which co- agent’s directive controls, or if the MPOA provides for alternative agent, health care provider must follow directive • If co-agents disagree and there’s no directive as to which coagent’s directive controls, health care provider can refuse to follow directive of any co-agent • If MPOA requires joint agreement of co-agents, health care provider may follow or refuse to follow directive of any co-agent if there is disagreement or if not all are available • Health care providers have no civil or criminal liability for following or refusing to follow directive in compliance with these rules

POSSIBLE ISSUES IN 2021 SESSION

POSSIBLE ISSUES IN 2021 SESSION • Remote Notarization • Electronic Wills • Inevitable, but few states currently allow. • Lucrative for commercial will-kit providers. • Uniform Act is from July 2019; only Utah has adopted. • Many, many concerns about implementation; REPTL prefers that Texas not be the testing ground. • Issues are being studied so that we can respond quickly with expedited approval if we need to oppose bad legislation and/or provide a better counterproposal.

2021 Legislative Proposals ———— REPTL Update Lauren Davis Hunt Osborne Helman Knebel & Scott, LLP Craig Hopper Mikeska PLLC October 14, 2020